The transcript [PDF] from Tuesday's oral argument before the US Supreme Court in Bowman v. Monsanto is now available, and I've done the PDF as text for you.

I know the media in general are saying that Mr. Bowman is almost certain to lose, judging by the questions asked by the justices. I disagree that questions asked by judges mean anything certain, by the way, but in any case some of the questions asked evidenced a deep understanding of the unusual aspects of the facts of this case and the dangers they pose.

This is a case the fact pattern of which has never come up before. While Monsanto tries to compare Roundup Ready seeds to software and vaccines, the truth is there's never been a case before about a patented invention that in the normal course of events naturally reproduces itself.

And what Mr. Bowman's attorney, Mark P. Walters, points out -- particularly at the end -- is that Monsanto's position removes patent exhaustion entirely from the picture, in that when you buy -- as opposed to licensing -- a patented product, there is supposed to be an end to the patent owner's rights. But Monsanto claims that while there is a transfer of title, buyers must agree to a "Technology Agreement" which places conditions on use. Can it have it both ways, sale and license? The only way to use the invention here is to plant and grow the seeds. And Monsanto is claiming rights not only to generation 1 seeds but every generation after that. You can't plant those generation 2 seeds for a crop without infringing the patent, they claim, even if you bought them from somebody else.

As Patently O earlier pointed out, "Both the district court and the Court of Appeals for the Federal Circuit held that the exhaustion doctrine does not apply to new copies of a patented product created by the accused infringer." However, Mr. Walters argues, if that applies in this situation, where is the exhaustion of patent rights in this picture? These are self-replicating seeds. It's not the same as copying a million copies of someone's software. It's just doing what farmers do. Can Monsanto legally void the patent exhaustion doctrine in such a fact pattern? Can it force farmers to farm differently than they have from the beginning of time? We're talking about 90% of all soybeans planted in the US being from Monsanto's patented seeds, after all. How do you avoid infringing now? You'd have to buy new seeds from Monsanto every planting. Think of what that means.

These are the right questions, at least, and I believe at least some of the justices understood it.

The justices try pointing out various *other* uses, trying to answer Mr. Walters' statements about patent exhaustion, and Mr. Walters keeps quietly reminding them that patent exhaustion doesn't have to do with all the *other* things you can do:

CHIEF JUSTICE
ROBERTS: What -- what about Mr. Waxman's suggestion that we've
already decided this in Microsoft v. AT&T?

MR. WALTERS: That
case is not on point, Your Honor. That had to do with 271(f), and
actually came out on the side of more restrictive patent rights.
And this is not like software. This is an
invention that the only way to use the invention -- now, repeat, the
only way to use the invention -- is to plant it and to grow more seeds.

So if you don't apply the exhaustion doctrine and allow someone to use
it, you're choosing patent rights over personal property rights, and
that's never been done in 150 years of this Court's exhaustion cases.

JUSTICE BREYER: Don't people or animals eat them?

MR. WALTERS: That is
certainly a use, but it's not the invention.

JUSTICE BREYER: Well, then
why is it the only way you can do is to plant them? That isn't the only
thing you could do with it -

MR. WALTERS: Well, that's not use.

JUSTICE
BREYER: You can buy them from the grain elevator and sell them for other
things.

MR. WALTERS: That's not use of the invention, Justice Breyer.
And exhaustion is about conferring on the purchaser a right to use the
invention. There's no limit to Monsanto's -

JUSTICE BREYER: The
invented thing. The invented thing. The invented aspect of the seed is
it
has a gene in it that
repels some other insecticide or something that they have. I
understand that.

MR. WALTERS: The same argument came up in
Quanta, Your Honor, with -

JUSTICE BREYER: You don't use
that. I don't think they used that particular -- well, go ahead.
You go ahead.

MR. WALTERS: There were other uses for the
computer chips, of course, that were asserted. And the key was
that those computer chips practiced the patent. And you would
swallow up the Exhaustion Doctrine entirely if we just could think
of other uses for these things that have been sold.

The key
is, does it use -- is the purchaser allowed to use the invention? And
under Monsanto's theory, the purchaser isn't allowed to do that. And
that's no Exhaustion Doctrine at all -

JUSTICE BREYER: The
people buying from grain elevators are mostly people who take
these chips -- whatever they are, the seeds -- and they sell
them for making tofu, or they sell them to eat, or this --
there are loads of uses, aren't there?

MR. WALTERS: But the only
use of the invention is to plant it, and that's the use that
Mr. Bowman makes.

JUSTICE SCALIA: Yes, but -- but that's - nothing
prevents him from planting it. What he is prevented from doing is
using the -- the consequences of that planting, the second
generation seeds, for another planting. That's all he is prevented
from doing. He can plant and harvest and eat or sell. He just can't
plant, harvest, and then replant.

MR. WALTERS: So -- the
judgment in this case was based on acres planted, and so I'm not
sure how many -- we talked a bit about the N plus 2 generation,
and we don't know in the record what the N plus 2 generation
was, in terms of his sales or his yields. That wasn't before the
district court on summary judgment. So I'm not sure how you could
affirm based on the judgment below, which was a finding that
conditional sales prevented the application of the Exhaustion
Doctrine.

JUSTICE
SCALIA: You know, you're saying that you are preventing him from using it.
He's not prevented from using it. He's not prevented from using it. He
can use it for what it's meant for, for raising a crop. He just cannot
use the
product -- that new
crop -- for replanting. That's all. He has to sell that new crop
for feed or for some other purpose. But to say that -- that he's
prevented from using what he has bought is simply not true. He can use
it, plant it, and harvest the crop.

MR. WALTERS: But you're
saying that there's no exhaustion in the progeny where he owns that
seed outright.

It's a real issue. Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), is the case where the US Supreme Court ruled, in a decision written by Justice Clarence Thomas, that "[t]he longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item." And that's why they keep mentioning it. But the quirk is, that while Quantaheld that the "authorized sale of an article that substantially embodies a patent exhausts the patent holder's rights and prevents the patent holder from invoking patent law to control postsale use of the article," this isn't a postsale use of "the article" but rather a newly infringing copy, or so Monsanto's argument seems to be, and frankly some of the justices seemed to agree with it.

Now, Justice Sotomayor in the early part of the argument thinks she has the answer:

MR. WALTERS: It is
not there. This -- this Court has -- has not created an exception
to the exhaustion doctrine and in fact it's explicitly said it
won't do that and that's an act -- and that's an activity for
Congress.

JUSTICE SOTOMAYOR: I'm sorry. The Exhaustion
Doctrine permits you to use the good that you buy. It never permits
you to make another item from that item you bought. So that's what I
think Justice Breyer is saying, which is you can use the seed,
you can plant it, but what you can't do is use its progeny
unless you are licensed to, because its progeny is a new item.

MR. WALTERS: This is obviously a brand-new case where we're
dealing with the -- the doctrine of patent exhaustion in the
context of self-replicating technologies. So what you have here is if
you take the Federal Circuit's view, then you have no -- you have
no exhaustion at all for someone to practice the invention.

Sure, you can do all the things that you talked about, Mr.
Breyer -- or Justice Breyer, but that has nothing to do with the
-- or with the invention.
So you're taking the Exhaustion Doctrine
for
self-replicating inventions, you're modifying this Court's case law
substantially, and that ought to be done in Congress.

Justice Elena Kagan was the first to notice and comprehend the implications of Monsanto's position, and she asks Seth Waxman, the lawyer representing Monsanto about it:

JUSTICE KAGAN: Mr.
Waxman, there is a worrisome thing on the other side, though, too.
And that is the Bureau position has the -- has the capacity
to make infringers out of everybody. And that is
highlighted actually in this case by how successful this product is and
how large a percentage of the market it has had.
So that -- you know,
seeds can be blown onto a farmer's farm by wind, and all of a sudden you
have Roundup seeds there and the farmer is infringing, or there's a
10-year-old who wants to do a science project of creating a soybean
plant, and he goes to the supermarket and gets an edamame, and it turns
out that it's Roundup seeds.

(Laughter.)

JUSTICE KAGAN: And, you know,
these Roundup seeds are everywhere, it seems to me. There's, what, 90
percent of all the seeds that are around? So it seems as though -- like
pretty much everybody is an infringer at this point, aren't they?

MR.
WAXMAN: Certainly not. Let me make - let me make three points, starting
with the edamame and moving up to inadvertent infringers.
Edamame is an
immature form of the soybean seed. You can plant edamame -

JUSTICE
KAGAN: Okay. I'll change my hypothetical.

(Laughter.)

MR. WAXMAN: If I take my -- you know, my Girl
Scout troop and have them do a science experiment, it will rot but it
will not generate. And that -

JUSTICE KAGAN: And I thought I was
being so clever, too.

(Laughter.)

MR. WAXMAN: Well, it
also reminds me that my original answer to Justice Kennedy is
wrong, which is that edamame is taken from the pods before the --
the thing becomes actually a seed that can be processed in
any other way.

Your point about the ubiquity of Roundup
Ready's use is a fair one. I mean, this is probably the most
rapidly adopted technological advance in history.
The very first
Roundup Ready soybean seed was only made in 1996. And it now is grown
by more than 90 percent of the 275,000 soybean farms in the United
States.
But size -- that is, success -- has never been
thought and can't be thought to affect the contour of patent rights.
You may very -- with soybeans, the problem of blowing seed is not
an issue for soybeans. Soybeans don't -- I mean, it would take
Hurricane Sandy to blow a soybean into some other farmer's field. And
soybeans, in any event, are -- you know, have perfect
flowers; that is, they contain both the pollen and the
stamen, so
that they -- which is the reason that they breed free and true,
unlike, for example, corn.
The point that there may be many farmers
with respect to other crops like alfalfa that may have some
inadvertent Roundup Ready alfalfa in their fields may be true,
although it's -- it is not well documented. There would be
inadvertent infringement if the farmer was cultivating a patented
crop, but there would be no enforcement of that.
The farmer
wouldn't know, Monsanto wouldn't know, and in any event, the
damages would be zero because you would ask what the reasonable
royalty would be, and if the farmer doesn't want Roundup Ready
technology and isn't using Roundup Ready technology to save
costs and increase productivity, the -- the royalty value would be
zero.

JUSTICE BREYER: Well, is -- I mean, that is an
interesting question, because you can imagine -- you see, this is
-- your answer -- this really deals with all -- it could be with
genetic patents, with -- with hosts of things which are
self-replicating.

MR. WAXMAN: Mm-hmm.

JUSTICE BREYER: And
some of the self-replicating items, which are infringing items,
end up inadvertently all over the place. Is there anything
in the patent law that deals with that? Is an
involuntary infringer treated the same under patent law as a voluntary
infringer?

MR. WAXMAN: Well -

JUSTICE BREYER: Is -- is there
precautions that you take? I mean, is there anything in patent law that
helps?

MR. WAXMAN: So infringement is -- unlike contributory
infringement or induced infringement, the act of infringement, that is a
violation of Section 271 -

JUSTICE BREYER: Right.

MR. WAXMAN: -- is a
strict liability tort, but it requires affirmative volitional contact -
conduct. That is, it's not that -- a thing doesn't infringe; a person
infringes.

JUSTICE BREYER: Well, the person plants it.

MR. WAXMAN: The
person -

JUSTICE BREYER: I mean, he plants it, but he doesn't even
know, you know. He's just got -- we can imagine a lot of circumstances
where this would be a - where Justice Kagan's question could apply.

MR.
WAXMAN: I mean, take the -

JUSTICE BREYER: But you're just saying that
would need a -
MR. WAXMAN: Sure.

JUSTICE BREYER: -- modification in patent law.

See what I mean? I can't predict the outcome, but I think it's clear that at least some of the justices see the problem.

And then, when Monsanto's attorney is near the end of his 30 minutes, Justice Kennedy asks a question showing that he's understanding a problem too:

JUSTICE KENNEDY: I do have this problem that goes back to
Justice Scalia's example. What about the commodity bin that has 2
percent of the patented seeds in them? Now, you get away from the
article by saying, oh, well, almost all seeds are Roundup these
days. But let's have some different commodity where there are
three or four different patented items but 1 percent or 2 percent of
the seeds are in the bin. You can't -- you can't sell those. That
seems to me a very extreme result.

MR. WAXMAN: Well, I mean,
when you say you can't sell them. So, as Ms. Sherry was pointing out
--

JUSTICE KENNEDY: You can't sell them if
they know they are going to be used for seeds, and you can't
use them for seeds even though there is only 1 percent of the
seeds?

Even Justice Scalia noticed:

JUSTICE SCALIA: That's a pretty horrible result, but let me give you another horrible result, and that is if -- if we agree with you, farmers will not be able to do a second planting by simply getting the undifferentiated seeds from a grain elevator, because at least a few of those seeds will always be patented seeds, and no farmer could ever plant anything from a grain elevator, which means -- I gather they use it for second plantings where the risks are so high that it doesn't pay to buy expensive seed. Now they can't do that any more because there's practically no grain elevator that doesn't have at least one patented seed in it.

Needless to say, there is never a satisfying answer to any of these questions. And that is why, despite the bleakness of the picture -- the natural outgrowth of a mistaken decision to allow genes to be patented in the first place -- I think the result of today's oral argument was not totally one-sided. What might happen is that the court will decide to so narrowly decide the instant dispute that they avoid the bigger picture questions altogether, which is pretty much what the US government's lawyer suggested:

MS. ARBUS SHERRY: Right. So if Monsanto authorized that
first sale and authorized the planting, they would also have to
authorize the sale of the second generation seed because it's a new
article. And that's exactly what happened here. If you look at the
technology agreement -- and it's not just because it's a
contract because I think it's significant to the analysis --
Monsanto, upon the first sale of the bag of Roundup Ready seed,
authorizes the planting for one commercial crop and it authorizes
the farmer to sell that as a commercial crop or to use it for any
purpose other than replanting. That is an authorized sale. So if
you take that second
generation seed -- "second generation" is a bit of a misnomer, but if you take
that seed and you follow it through, all of the patent rights with respect
to that
particular seed have been exhausted. But you cannot take
that seed without separate authorization, plant it in the ground,
and come up with the next generation of seed. That would be -

CHIEF JUSTICE ROBERTS: That sounds like the patent rights
haven't been exhausted then.

MS. ARBUS SHERRY: They have been
exhausted with respect to the particular article sold. When the
Court's talked about patent exhaustion, you are not
exhausting the rights
with respect to the patented invention. You're exhausting -

CHIEF JUSTICE ROBERTS: You are saying it's exhausted with
respect to the one bean?

MS. ARBUS SHERRY: Yes, and that's always
the case just as if I sell -- I mean, even if you think in the
copyright -

CHIEF JUSTICE ROBERTS: That's always the case
because it's a very -- the other cases haven't involved this
situation where you are talking about a self-regenerating product.

MS. ARBUS SHERRY: But I think there is other technology out
there. I mean, even if you think of software, for example, there
are plenty of other products where one reasonable use is to make
more. I can purchase software; one reasonable use would be to
make a dozen other copies to give to my friends or sell on
eBay. It's a reasonable use, but it's an infringing one.

CHIEF JUSTICE ROBERTS: Well, we haven't had that case either.

MS. ARBUS
SHERRY: The Court hasn't had that exactly, but it did decide Microsoft
v. AT&T, and granted that was on a slightly different issue, but in that
case the Court recognized -- that case, it was
copies from a master disk and it treated them as
separate copies because they were actually separate articles,
even though it was really easy to do, even though the actual
copying is not done by human hands, it's done by mechanical processes.
In fact, in that case the Court talked and compared the making of
software to the reproduction through biological processes,
which is what we are talking about here.
And so all we are asking
the Court to do today -- I recognize it's a new technology and to
the extent new technologies require different rules,
Congress is the body that should be making those different
rules. And when Congress has acted in this area in the Plant
Variety Protection Act and also in the software context in the
Copyright Act, it has not adopted the wholesale exemption that Petitioner is talking
for here.

The Monsanto attorney says that what Mr. Bowman can do is
"to simply buy conventional seed, multiply
it, you know, 20, 30, 40, 50, 80 times in a single generation and save
1/80th of it to replant in his second crop, if he doesn't want to buy
Roundup Ready technology for his second crop and use the glyphosate
aerially." But how do you avoid Roundup Ready? You can't tell by looking at it. And what about the Monsanto lawyer claiming that if you plant them without being aware they are Roundup Ready, nothing will happen to you? That doesn't match the headlines I've read about Monsanto going ruthlessly after farmers who have seeds growing on their land that they didn't plant but which blew in on the wind, but deeper it doesn't match the law. There's even another case, brought by PubPat, precisely about that. You can find the mp3 of oral argument before the Federal Circuit on January 10th here. Patent law gives you no breaks if you infringe by mistake, without realizing it. It offends me that Mr. Waxman would tell the court what he did. And I hope they research and realize that what he said isn't true, assuming the articles, such as the one I linked to, are.

[ Update: Here's an actual case, where Monsanto sued a farmer who said he had not planted Monsanto seeds but had his field contaminated. The lawyer for Monsanto is quoted in the media as saying in court that it doesn't matter if the farmer knew or he didn't.]

And by the way, if Monsanto's Roundup Ready soybeans now make up 90% of all soybeans planted in the US, that means we are pretty much all eating genetically modified soybeans here. It's unavoidable. I seriously don't want to do that, so I just stopped buying any soybean products.

But my main point is, is Monsanto allowed to own or control all the soybeans planted in the US, or even 90% of them, without antitrust issues being in the picture?

Do you see, I hope, what is wrong with patenting genes?

Between this case and the insane smartphone patent wars, it seems all the chickens are coming home to roost in patent law. What a deep disaster patents result in when they are allowed to cover what should be unpatentable subject matter. And that brings me finally to Monsanto's argument that it spends millions on research and development of these seeds and it needs to recover that expense, I'd ask them to please stop. Seriously. I don't want genetically modified food, and I don't know anyone who does, except companies that sell it. According to USA Today, the end result of these seed monopolies is higher prices. Duh:

The Center for Food Safety released a report last week showing that three corporations control more than half of the global commercial seed market, resulting in dramatic price increases. From 1995-2011, the average cost to plant 1 acre of soybeans rose 325%, the report found.

Emphasis added. So that's what this genetically modified food business is really all about, then? Gouging farmers? That inevitably raises the prices for food for the rest of us. Why is that a good idea? Is everything in the world now all about greed, absent all human values? It's very depressing, but maybe it's just because I'm following patent law cases these days that makes it seem so.

As always, go by the official PDF for anything that matters. This text version is not official, and while I strive to be accurate, I'm merely human, so if you see a mistake, kindly let me know so I can fix it.

[ Update: Here's Mr. Bowman himself, interviewed by OnPoint's Tom Ashbrook, after his case was argued. He agrees with the media that it doesn't look good for him, and he says that is what his lawyer told him when they left the court. He couldn't hear well enough to know on his own. Dan Ravicher of PubPat also is interviewed. The Public Patent Foundation filed an
amicus brief [PDF] in support of Mr. Bowman.]

*****************

Official - Subject to Final Review

IN THE SUPREME COURT OF THE UNITED STATES

-----------------x

VERNON HUGH BOWMAN,

Petitioner,

v.

MONSANTO COMPANY, ET AL.

-----------------x

No. 11-796

Washington, D.C.

Tuesday, February 19, 2013

The above-entitled
matter came on for oral argument before the Supreme Court of the United
States at 11:27 a.m.

APPEARANCES:

MARK P. WALTERS, ESQ., Seattle, Washington; on behalf
of Petitioner.

MELISSA ARBUS SHERRY, ESQ., Assistant to the
Solicitor General, Department of Justice, Washington, D.C.; for
United States, as amicus curiae.

Patent
exhaustion provides that once a patented article is sold, it passes
outside the protection of the Patent Act. It is available to be used by
the purchaser to practice the invention.

Now, what's the invention
here? The invention is a bit of DNA that, when asserted into a soy bean
seed, makes that seed and all the plants that grow from that seed
resistant to the active ingredient in Roundup. Now, the only way to
practice that invention is to plant the seed and to grow more seeds.

CHIEF JUSTICE ROBERTS: Why in the world would anybody spend any money to
try to improve the seed if as soon as they sold the first one anybody
could grow more and have as many of those seeds as they want?

MR.
WALTERS: I agree no one would do that,

2

and I don't think that is
the situation here. I think we have, and we have explained how
Respondents here can protect their invention through contracts. They
don't have to sell it outright. They can sell it through an agency
model, but I think the more important -

CHIEF JUSTICE ROBERTS: So the patent system is based, I think, on
the recognition that contractual protection is
inadequate to encourage invention.

MR. WALTERS: Well, part of the
patent policy as well is to protect the purchaser, and that's
been part of this Court's law for more than 150 years.

Under
Respondent's theory, any farmer who grows a soy bean seed is
infringing the patent but for the grace of Monsanto. And that's -- a
lot of farmers in this country, when we have over 90 percent of
the acreage that is Roundup Ready. So under Monsanto's theory,
there is really no limit by the exhaustion doctrine?

JUSTICE
SCALIA: I didn't understand that last sentence. Any farmer who plants
and grows soybeans is violating the patent?

MR. WALTERS: Is
infringing under license by

4

Monsanto. Let's take the first -

JUSTICE
SCALIA: I thought that their claim is he only violates the patent
if he tries to grow additional seeds from his that the only claim
here?

MR. WALTERS: The reach of Monsanto's theory is that once that seed is sold, even though title has
passed to
the farmer, and the farmer assumes all risks associated with farming, that they can still
control the ownership of that seed, control how that seed is used.

JUSTICE SCALIA: No, not that seed. It's different seed. That
seed is done. It's been planted in the ground and has grown other
seed. It's the other seed we are talking about. It's not the very
seed that was sold. Right?

MR. WALTERS: That's correct, Your
Honor, but if we don't apply -- if exhaustion is eliminated,
rather, for the progeny seed, then you are taking away the
ability of people to exchange these goods freely in commerce. You
have essentially a servitude on these things that are exchanged,
and every grain elevator who makes a sale is infringing.

JUSTICE KENNEDY: I think you may be right in the way you
characterize Monsanto's argument, and I have great difficulties
with characterizing it that way,

5

as Justice Scalia's question indicates. But Monsanto can still prevail if you say that there's a patent
infringement if he plants it for seed and uses the seed to replant.
That's not as far as Monsanto goes, but it it's one way to
characterize their argument and to make it sensible.

MR. WALTERS: If you assume that
there is
exhaustion in the seeds that are sold to the farmer - let's
take our particular case here. Mr. Bowman went to a grain elevator
and he bought from the grain elevator without restriction seeds to
-- with his purpose to plant them. Now, the only way that he can make
use - if you assume in the first instance that there is
exhaustion to the seeds that Mr. Bowman purchased from the
grain elevator, you are taking away any ability for him to use
that seed or use the invention.

Let's take for example Claim 130
which is at supplemental appendix 19, that is a method for
selectively controlling weeds in a field. It has two elements; the
first element is planting the crop seed and it's a particular crop
seed with all the particular genetics that encode for resistance
to Roundup, and then the next step is to apply to the crop and
weeds in the field a sufficient amount of glyphosate herbicide.

Now, if you say that there is exhaustion in

6

the seeds that Mr. Bowman purchased from the grain elevator but you
say it doesn't apply to the progeny, you are not allowing him to
actually practice the invention to grow more seeds.

JUSTICE BREYER: No,
but you are allowing him to use those seeds for anything else he wants
to do. It has nothing to do with those seeds. There are three
generations of seeds. Maybe three generations of seeds is enough.

(Laughter.)

JUSTICE BREYER: It is for this example. First of you have
the Monsanto, the first generation they sold. They have children, which
is the second generation. And those children have children, which is the
third generation, okay? So, bad joke.

(Laughter.)

JUSTICE BREYER: So, we
are talking here - he can do what he wants with the first generation.
Anything he wants. And moreover, when he buys them from Monsanto, he can
make new seeds. He can make generation two, because they've licensed him
to do it.

Here, he buys generation two. Now, he can do what he wants
with those seeds. But I'll tell you, there is a problem, because the
coming about of the third generation is itself the infringement. So the

7

second generation seeds have nothing to do
with it. If he went into a room and had a box that he bought from a
lab and he put rocks in it and he said, hocus-pocus and lo and
behold out came the third generation of seeds, he would have
infringed Monsanto's patent with that third generation, would he
not?

MR. WALTERS: No.

JUSTICE BREYER: No, he wouldn't have?
You mean if he goes and finds a new way of making these seeds
which happens to be you pick some grass and you intertwine it and
various things like that and lo and behold you have a perfect copy
of Monsanto's patented seed, he hasn't made it, he hasn't infringed?
Why not?

MR. WALTERS: Well, I guess I misunderstood your
question.

JUSTICE BREYER: My question is the same with the
grass as with the magic box. I am saying the problem for you here,
I think, is that, infringement lies in the fact that he made
generation three. It has nothing to do with generation two. That has
just a coincidence. But that is in fact the way he made these
seeds. But he can sell, resell generation 2, and he can do whatever he wants with it.

If he sterilizes it and uses them in a whatever he circus, he can do it. The only thing
he cannot do is he

8

cannot create generation 3, just as he couldn't use generation 2
seeds to rob a bank.

You know, there are certain things that the law
prohibits. What it prohibits here is making a copy of the patented
invention. And that is what he did. So it's generation 3 that concerns
us. And that's the end of it.

Now, what is your response to that?

MR.
WALTERS: Justice Breyer, my response is, if you applied the law that way
to side making over use, you are eliminating the exhaustion doctrine in
the context of -- of patented seeds. You're saying that he can do -

JUSTICE GINSBURG: But why
-

MR. WALTERS: -- anything but practice the invention.

JUSTICE GINSBURG: But why
-- you said making or use and it isn't an either-or thing then -- the other
side has pointed out. You can use the seed to make new seeds. So use and
make aren't -- it's not either you use it or you make it. You can use it
to make a new item.

MR. WALTERS: Justice Ginsburg, that is the
point of the invention here. If you look at claim 130 again, for
example, you are saying he can't practice

9

claim 130, which is
certainly embodied in the seeds he purchased from the grain
elevator.

JUSTICE GINSBURG: Well, suppose he -- he had never
bought any Monsanto seeds. He just goes to the grain elevator and
90-odd percent of those seeds have the genetic composition. So -- and he
planted that and he harvested it. Would he be infringing on Monsanto's patents?

MR. WALTERS: No.

JUSTICE GINSBURG: So he never has to buy any seed at all from Monsanto.

MR. WALTERS: Well, in
practical matters it doesn't work that way, because the seed
that's available at a grain elevator is not a very good source of
seed and farmers are not going to be able to eliminate the
need to go to Monsanto or the other seed companies every
year by going to the grain elevator.

Great evidence of that
is the fact that my client, every year that he planted a second
crop using the grain elevator seed, he bought high quality seed
from Pioneer. Now, if this grain elevator -- grain elevator seed
was so good, why didn't he use it for his first crop?

JUSTICE BREYER: I'm still not getting the answer. I'm going to
try once more. Now, when you buy

10

generation 2,
well, there are a lot of things you can do with it. You can feed it to
animals, you can feed it to your family, make tofu turkeys. I mean,
you know, there are a lot of things you can do with it, all right.

But I'll give you two that you can't do. One, you can't pick
up those seeds that you've just bought and throw them in a child's
face. You can't do that because there's a law that says you can't
do it.

Now, there's another law that says you cannot make copies
of a patented invention. And that law you have violated when you
use it to make generation 3, just as you have violated the law
against assault were you to use it to commit an assault.

Now, I think that's what the Federal Circuit is trying to get
at. And so it really has nothing to do with the exhaustion doctrine.
It has to do with some other doctrine perhaps that -- that somehow
you think should give you the right to use something that has as a
basic purpose making a copy of itself. Maybe you should, but I
don't see that. Where is that in the law?

JUSTICE BREYER: Is that there? Is that -
is that there in the exhaustion doctrine?

MR. WALTERS: It is
not there. This -- this Court has -- has not created an exception
to the exhaustion doctrine and in fact it's explicitly said it
won't do that and that's an act -- and that's an activity for
Congress.

JUSTICE SOTOMAYOR: I'm sorry. The Exhaustion
Doctrine permits you to use the good that you buy. It never permits
you to make another item from that item you bought. So that's what I
think Justice Breyer is saying, which is you can use the seed,
you can plant it, but what you can't do is use its progeny
unless you are licensed to, because its progeny is a new item.

MR. WALTERS: This is obviously a brand-new case where we're
dealing with the -- the doctrine of patent exhaustion in the
context of self-replicating technologies. So what you have here is if
you take the Federal Circuit's view, then you have no -- you have
no exhaustion at all for someone to practice the invention.

Sure, you can do all the things that you talked about, Mr.
Breyer -- or Justice Breyer, but that has nothing to do with the
-- or with the invention.

So you're taking the Exhaustion Doctrine
for

12

self-replicating inventions, you're modifying this Court's case law
substantially, and that ought to be done in Congress. In fact --

JUSTICE
GINSBURG: Well, you just said that -- that we haven't had a case
involving self-replicating. I mean, the Exhaustion Doctrine was
shaped with the idea of an article; there was an article that
you could use and then you use it and it's used up. But we haven't
applied the Exhaustion Doctrine when you have a new -- when you
create a copy of the original.

So it's -- it's not that we have
law in place. We've been dealing with an item with the
Exhaustion Doctrine and now we have hundreds of items,
thousands of items, all growing from that original seed.

MR.
WALTERS: The Exhaustion Doctrine, the policy that underlies this
Court's cases is fundamentally a choice about the purchaser's
rights in that personal property over the patentee's rights in the
monopoly to use that monopoly and increase its sales. This
Court has always chosen the purchaser's rights over the patentee's
rights to increase sales. And we're just asking you to make the
same choice here.

JUSTICE KAGAN: Well, except to the extent,
as Justice Breyer suggested, except to the extent that the
purchase is going to use the article just to create

13

a new one of the exact same kind. And it seems
to me that what you're suggesting is that the basic rule that
says that the purchaser does not get to do that should have an
exception for self-replicating technologies.

MR. WALTERS: First, we
disagree that the activity of basic farming could be considered
making the invention. If you read the statute, it says making the
invention, not just making a copy like it would be in the
Copyright Act. We have the invention, which is a particular
genetic sequence that was made principally by Monsanto's genetic
engineers. And farmers, when they plant seeds, they don't exercise
any control or dominion over -- over their crop. Otherwise, every
year they'd have a bumper crop.

JUSTICE SOTOMAYOR: Do you
mean they don't do any work, they don't lay the soil and the
nutrients it needs, water when it needs watering, protect it from
animals? They do no work -

MR. WALTERS: They absolutely -

JUSTICE SOTOMAYOR: -- in growing the seed?

MR. WALTERS: They
absolutely do work, but they don't have control over the creative
process. They plant, they spray and they pray.

JUSTICE
SOTOMAYOR: I'm sure if they don't do all of the things I said, it
doesn't grow. So aren't

14

they involved in its creative -- in its creation?

MR. WALTERS: They certainly aren't in control of it. You ask any
farmer who's lived through a drought or through a terrible flood
and they will say they're not the ones who are making these -

CHIEF JUSTICE ROBERTS: Well, you only need one -- I mean, you
throw the seeds on the ground, one or two of them are going to grow
and you still have the same case, right?

MR. WALTERS:
Absolutely. And -- and that's how broad this position is. It doesn't
matter how you come into possession with these seeds. You are
committing patent infringement if you -- any cell division
is patent infringement.

JUSTICE BREYER: That's true, but that's
what I thought you were going to respond. I thought you were going
to respond to me that my question then makes it infringement when
your client buys generation 1 from Monsanto, because they buy
generation 1 from Monsanto, they plant it in the ground and, lo
and, behold, up comes generation 2. And generation 2, on the basis of
what I was asking you, is just as much a violation.

But I
think, though I'll find out from them, that the response of that
is, yes, you're right, it is just as much a violation. That's why we,
Monsanto, give

15

the buyer a license to do it.

And so it all seems to
work out. You don't need any exception. There's no exception from
anything. When you create a new generation, you have made a
patented item, which you cannot do without the approval of the
patent owner. Therefore, Monsanto gives that approval when you buy
generation 1.

Now, it seems to me all to work out without any
need for exception. And I'm putting to you my whole thought so
that you can respond to it.

MR. WALTERS: Thank you, Justice
Breyer. What Monsanto wants to do in your scenario is they want
the farmer to assume all the risks of farming. They want -- but
they still want to control and act as owners of the property that
is owned no doubt by that farmer. When that farmer grows the
progeny seed, they insure the risk that they're not going to have
a crop in the first place. If they drive to the grain dealer to sell
their harvest -- they get one paycheck a year, by the way -
they, if they get into a wreck, that's not Monsanto's
problem; that's the farmer's problem.

So what they're
essentially asking for is for the farmers to bear all the risks of
farming, yet they can sit back and control how that property is
used.

And that's fundamentally inconsistent with how this

16

Court
has interpreted the Exhaustion Doctrine. The thing that's very
important is this is not a license, this is an outright sale to the
farmers of the first generation.

And then they are -- they
plant those seeds because they have, under the Exhaustion Doctrine,
a right to use the invention, and then those progeny seeds 8 are
owned outright by every farmer, and they assume all risk of loss. So
if -- if -- Monsanto wants to control -

JUSTICE GINSBURG:
And they may -- they may they own them, but that doesn't mean that
they are infringing. They may -- the seeds are owned by the
farmer. But when he uses them to grow more seeds, he's infringing on
that patent. So I don't think that the ownership has anything to
do with it.

MR. WALTERS: It's the servitude on the title. And
those things get sold to the grain elevators, and now every time
the grain elevator makes a sale, it's technically infringing. And --
and that's something that our law has never allowed for centuries.

And one of the main problems is that you have farmers, their
main livelihood here is to sell the seeds that they grow. Now, if
they don't have clear title and if they don't have the ability to
sell the property that

17

they -- that they grow,
then that impinges upon their ability to make a living.

JUSTICE KENNEDY:
I have only one question so far, and it's a farming question. With some
crops if you are going to make seeds, you leave the crop in longer. In
-- what about soybeans? If the farmer has the north 40 and the south 40,
the north 40, he's going to plants soybeans to be used for flour, human
consumption, and south 40, he wants seeds. Does he leave the plants in
the ground the same amount of time?

MR. WALTERS: You know, most farmers
are not growing soybeans for -- for seed. There are various types of -

JUSTICE KENNEDY: You would not? Okay.

MR. WALTERS: -- various types of
farmers who are -- who are growing foundation seed, for example, that is
very close to the -- to the first generation seed that's engineered.

JUSTICE KENNEDY: But that's -- if you're going to
use the soybeans for seeds as opposed to flour, do you leave them in the
ground any longer?

MR. WALTERS: I don't know the answer to

18

that question.

JUSTICE KENNEDY: Okay.

JUSTICE KAGAN: Mr. Walters, can you go back to the Chief
Justice's opening question, because the Chief Justice asked you
what incentive Monsanto would have to produce this kind of product
if you were right.

And you said, well, they can protect themselves
by contract. Actually, it seems to me that that answer is
purely insufficient in this kind of a case, because all that
has to happen is that one seed escapes the web of these contracts,
and that seed, because it can self-replicate in the way that it
can, essentially makes all the contracts worthless. So again, we are
back to the Chief Justice's problem, that Monsanto would have no
incentive to create a product like this one.

MR. WALTERS:
Taking our example here where -- where Petitioner bought commodity
seeds, it's an undifferentiated mixture, it can't be
overemphasized how different every single seed is, you don't know
a Monsanto from a Pioneer from an Asgrow. You don't know the
maturity rate. If I am a farmer, I need a particular maturity bean
for my field because I don't want it to mature before it gets high
enough for the combine to come around and cut it.

19

So you want to be able to have -- you have all these things dialed in, these different
variabilities. So if you go to the grain elevator and
you don't know what exactly it is that you want and you just
get a mixture, that's not going to be real - competitive at all to
Monsanto's first generation seed.

Now, the possibility of somebody
selecting one and saying, ah, that's the exact one that I need for
my field, I'm going to cultivate that and let it grow into
enough seeds so I can plant my first crop, that would take a
number of years to grow a 1,000-acre farm, and it's not -- and by
that time, farmers -- the nature would have changed and evolved
where you would want the latest disease resistance by that point.

So there are -

JUSTICE KENNEDY: Please correct me if I am wrong. I thought that's exactly
what Bowman did here. He went to a grain elevator and he -- he used the
seeds, and -- and he didn't know exactly the percentage mix, but he used them.

MR. WALTERS: Well, he -

JUSTICE KENNEDY: So he did exactly
what you said is uneconomical.

MR. WALTERS: No. Actually, he
did something quite different. He didn't select a

20

particular variety. He selected for the particular trait,
Roundup Ready, but there are probably more than a dozen different ways
in which the seed can vary - disease resistance, maturity rates. And if
you are a farm -

CHIEF JUSTICE ROBERTS: I'm sorry, maybe I didn't read
this right. I thought what he did was plant all the commodity seeds, and
then applied the Roundup so that all that was left was the Roundup
Ready-resistance seeds, and then he used those.

MR. WALTERS: That's
correct. But if you look at a field that you've planted with grain
elevator seed, it's going to be all different colors, because they're
going to be all different varieties, they're all going to mature at a
different rate. So that if -- when it comes harvest time, some of them
are going to be too close to the ground so that your combine's going to
miss -

JUSTICE SCALIA: Including the Monsanto seeds?

MR. WALTERS:
Including the Monsanto seeds.

JUSTICE SCALIA: Some of them would -- would grow at different rates than others.

MR. WALTERS: Absolutely.

CHIEF JUSTICE ROBERTS: How come that's not

21

a
problem the first time you plant?

MR. WALTERS: It's a problem each
time.

This is a very poor choice -- choice of seed, but it
only makes sense to plant in a risky situation, like when a
farmer has been washed out from a flood, for example, and it's late
in the -

CHIEF JUSTICE ROBERTS: No, no. I mean the very first
time, you get nothing but Monsanto Ready -- Roundup Ready seeds and
you plant those. Are you telling us you have the same problem with
them growing at different rates and all that?

MR. WALTERS:
Yes.

CHIEF JUSTICE ROBERTS: So that doesn't make the
commodity seeds any different?

MR. WALTERS: I'm sorry. I must have
misunderstood your question. The commodity seeds, with -- the
Roundup Ready commodity seeds will all grow at different rates and
have different disease resistance, different maturity rates.

JUSTICE SCALIA: But not the original batch that he buys from Monsanto?

MR. WALTERS: Correct. So -

JUSTICE SCALIA: The original batch that he buys from
Monsanto, in addition to being resistant to the chemical that
kills the weeds, in addition to that,

22

they all mature at the same rate.

MR. WALTERS: Exactly. They're a uniform variety. They are exactly what a
farmer needs for their -

JUSTICE SCALIA: So all the Monsanto seeds are
not -- are not fungible.

MR. WALTERS: That's correct.

JUSTICE SCALIA:
There are some of them that mature early, some mature later.

MR.
WALTERS: It makes sense. I mean, they allow these seeds to be dumped
into the common grain elevator. They don't put any restrictions on what
the elevator does with it. There were no restrictions on my client when
he purchased them from the grain elevator.

So it's less of a problem for
Monsanto for people going to the grain elevator to plant. Nevertheless,
it's -- it's an outright sale, an exhaustion applies to that particular
sale, and permits that farmer to use it. It's never going to be a threat
to Monsanto's business, people planting grain elevator seed.

Now, to
answer your question, Justice Kagan, about -- well, under our theory, if
somebody does breach a contract with Monsanto, they don't have to do it
under contract law, they can actually do it under an agency

23

model like General
Electric did in the 1920s. And then that's only fair because there, the agent
growers are assuming -- well, Monsanto was assuming
the risk that the farmers are.

And there is some equitability there with the -- the risk sharing between the farmers and
Monsanto. Now they want the farmers to take all the risks associated
with farming, yet they want to control how they use those seeds all the
way down the distribution chain.

I will reserve the balance of my time.

CHIEF JUSTICE ROBERTS: Thank you, counsel.

Ms. Sherry?

ORAL ARGUMENT OF
MELISSA ARBUS SHERRY, FOR UNITED STATES, AS AMICUS CURIAE

MS. ARBUS
SHERRY: Mr. Chief Justice, and may it please the Court:

I'd like to
start by talking about Court's decision in J.E.M., because I think it
resolves this case. J.E.M. was a patent case, and the issue there was whether or
not you could get a utility patent on a plant. The argument was that
you couldn't get a utility patent because the Plant
Variety Protection Act implicitly repealed the Patent Act in that
respect.

24

This Court rejected that argument, and the reason it
rejected that argument was because it found no conflict between the
two statutes. The reason it found no conflict between the two
statutes is because it said that it is harder to get a utility
patent, and for that reason, you get greater protection -- under
the Patent Act, you get greater rights of exclusion under the
Patent Act than you do under the PVPA.

And it said, most
notably, there is no seed saving exemption in the Patent Act,
there is no research exemption in the Patent Act. The consequence of
Petitioner's argument would be that this Court would not
only be reading a seed-saving exemption into the Patent Act,
and a research exemption, it would be doing much, much, much more
under the guise of patent exhaustion.

Justice Breyer, as you
pointed out, the Exhaustion Doctrine really has nothing to do with
this case, and that's because the Exhaustion Doctrine has
always been limited to the particular article that was sold,
and we are talking about a different article here. And it's never
extended to the making of a new article.

CHIEF JUSTICE ROBERTS:
Well, but I mean, this -- the reason it's never is because this is
an entirely different case. It's the reason it's here, because
you have the intersection of the Exhaustion

25

Doctrine and the -- the
normal protection of reinvented articles. So I don't think it gets you
very far to say that we've never applied the Exhaustion Doctrine
that way either. We have never applied the reinvention doctrine
to articles that reinvent themselves like plant seed.

MS.
ARBUS SHERRY: It's true that the Court hasn't had an exhaustion
case specifically involving the sort of replicating technology, but
when the Court has talked about exhaustion it has always focused
on the specific article that's sold and it has done that for a
reason. The concept underlying exhaustion is that when the
patentholder controls that very first sale it gets the one royalty
with respect to the actual article sold.

Petitioner's argument
isn't limited to the commodity grain that we are talking about. It's
not even limited -- when you talk -- Justice Breyer, you
mentioned the three different generations of seeds.
There is
actually quite a few more generations than those three.

If
the concept is the sale of a parent plant exhausts the
patentholder's rights not only with respect to that seed but with
respect to all the progeny seed, we would have to go all the way
back to the very first Roundup Ready plant that was created as
part of the

26

transformation event. Every single Roundup Ready seed in
existence today is the progeny of that one parent plant and, as
Your Honor pointed out, that would eviscerate patent protections.
There would be no incentive to invest, not just in Roundup Ready
soybeans or not even agricultural technology, but it's quite a
bit broader than that.

In order to encourage investment, the Patent Act provides 20 years of
exclusivity. This would be reducing
the 20-year term to essentially one and only sale. It would be near
impossible to recoup your investments with that first sale and so the
more likely consequence is that research dollars would be put elsewhere.

The other --

JUSTICE SCALIA: That's a pretty horrible result, but let me give you another
horrible result, and that is if -- if we agree
with you, farmers will not be able to do a second planting by
simply getting the undifferentiated seeds from a grain elevator,
because at least a few of those seeds will always be patented
seeds, and no farmer could ever plant anything from a grain
elevator, which means -- I gather they use it for second plantings
where the risks are so high that it doesn't pay to buy expensive
seed. Now they can't do

27

that any more because there's practically no grain elevator that doesn't have
at least one patented seed in it.

MS. ARBUS SHERRY: And the answer to that is this is actually not a traditional
farming practice. Despite what Petitioner says, farmers do not generally
go to grain elevators, buy commingled grain, plant it in the ground as seed. If
you look at the American Soybean
Association brief submitted on behalf of soybean farmers, it
says as much. If you look at the CHS brief 11 which is submitted on
behalf of grain elevators, it also explains that.

And there
is a number of reasons why that is the case. There's the reasons that
Petitioner talked about, which is that they an undifferentiated
mix, but there are other reasons as well. The business of grain
elevators is not to sell commingled grain as seed. If that was
their business they would have to comply with seed labeling laws.
They do not do so because it's not their business model.

MS. ARBUS SHERRY: But farmers wouldn't be able to use it for
another reason as well. Even if you

28

take patent law and you put it entirely to the side,
there is still the Plant Variety Protection Act.

JUSTICE
KENNEDY: But correct me if I am wrong; I thought that is what
Bowman did.

MS. ARBUS SHERRY: Bowman did, absolutely did it in
this circumstance. But Bowman also said that he is not aware of
other farmers who are engaging in this practice.

And again,
there is another reason. Putting aside the labeling laws, there is
the Plant Variety Protection Act and, as Pioneer points out in
their amicus brief, it is quite likely that a large amount of
the commingled grain is not only protected by patent, but is
actually protected by a Plant Variety Protection Certificate, and
what Petitioner did here would infringe the Plant Variety Protection
Certificate. So even putting patent law to the side, this is not
an economically viable source of seed for farmers,
regardless.

And Petitioner's argument again isn't limited
to the grain elevators. It would apply to saving your own seed
and planting it generation after generation. It would apply to selling
seeds to your neighboring farmer, and it would allow seed companies to
essentially compete with Monsato upon the first sale.

29

Now to the
extent -

CHIEF JUSTICE ROBERTS: So when -- when are the patent rights
exhausted in the seed?

MS. ARBUS SHERRY: The patent rights are exhausted
in the seed at the same time they are exhausted with respect to any
other product, upon an authorized sale. And so, Justice Breyer, again
you had it right when you were saying that you can do what you want. In
our view, once there is an authorized sale you can do what you want with
respect to the seed that you've actually purchased. That is the tangible
article you paid for.

But you do need permission from the patentholder
in order to make a new generation of seed. To the extent, you know, any
middle ground is warranted, with all due respect, we would point to
Congress as the appropriate body. This Court said -

CHIEF JUSTICE
ROBERTS: I'm sorry. Just so I can follow your -- just so I can follow
your answer, Monsanto sells the seed to the farmer. And you are saying
if the farmer grows the seed he can sell it to anybody he wants, right?

MS. ARBUS SHERRY: If Monsanto authorizes -

CHIEF JUSTICE ROBERTS: I'm
putting aside all the contracts and stuff.

30

MS. ARBUS SHERRY: Right. So if Monsanto authorized that
first sale and authorized the planting, they would also have to
authorize the sale of the second generation seed because it's a new
article. And that's exactly what happened here. If you look at the
technology agreement -- and it's not just because it's a
contract because I think it's significant to the analysis --
Monsanto, upon the first sale of the bag of Roundup Ready seed,
authorizes the planting for one commercial crop and it authorizes
the farmer to sell that as a commercial crop or to use it for any
purpose other than replanting.

That is an authorized sale. So if
you take that second
generation seed -- "second generation" is a bit of a misnomer, but if you take
that seed and you follow it through, all of the patent rights with respect
to that
particular seed have been exhausted. But you cannot take
that seed without separate authorization, plant it in the ground,
and come up with the next generation of seed. That would be -

CHIEF JUSTICE ROBERTS: That sounds like the patent rights
haven't been exhausted then.

MS. ARBUS SHERRY: They have been
exhausted with respect to the particular article sold. When the
Court's talked about patent exhaustion, you are not

31

exhausting the rights
with respect to the patented invention. You're exhausting -

CHIEF JUSTICE ROBERTS: You are saying it's exhausted with
respect to the one bean?

MS. ARBUS SHERRY: Yes, and that's always
the case just as if I sell -- I mean, even if you think in the
copyright -

CHIEF JUSTICE ROBERTS: That's always the case
because it's a very -- the other cases haven't involved this
situation where you are talking about a self-regenerating product.

MS. ARBUS SHERRY: But I think there is other technology out
there. I mean, even if you think of software, for example, there
are plenty of other products where one reasonable use is to make
more. I can purchase software; one reasonable use would be to
make a dozen other copies to give to my friends or sell on
eBay. It's a reasonable use, but it's an infringing one.

CHIEF JUSTICE ROBERTS: Well, we haven't had that case either.

MS. ARBUS
SHERRY: The Court hasn't had that exactly, but it did decide Microsoft
v. AT&T, and granted that was on a slightly different issue, but in that
case the Court recognized -- that case, it was

32

copies from a master disk and it treated them as
separate copies because they were actually separate articles,
even though it was really easy to do, even though the actual
copying is not done by human hands, it's done by mechanical processes.
In fact, in that case the Court talked and compared the making of
software to the reproduction through biological processes,
which is what we are talking about here.

And so all we are asking
the Court to do today -- I recognize it's a new technology and to
the extent new technologies require different rules,
Congress is the body that should be making those different
rules. And when Congress has acted in this area in the Plant
Variety Protection Act and also in the software context in the
Copyright Act, it has not adopted the wholesale exemption that Petitioner is talking
for here.

JUSTICE KAGAN: I'm sorry. In everything
you've said you agree with Mr. Waxman. There is this
issue in the case where you disagree, which is the
conditional sale doctrine. I am just wondering, before you finish
up, could you say a bit about whether that doctrine is causing
trouble as it presently exists in the Federal Circuit? In other
words, could we just ignore that doctrine if we wanted to, or is it a very

33

problematic one that we should take
do something about?

MS. ARBUS SHERRY: Your Honor, may I?
CHIEF JUSTICE ROBERTS: Sure.

MS. ARBUS SHERRY: I think the Court does not need to do something about it in
this case. I think
Quanta largely decided the issue, even
though it didn't say so explicitly, and as far as I'm aware the
Federal Circuit has not applied their previous version of the
conditional sale doctrine to enforce the post-sale
restrictions since this Court's decision in Quanta.

CHIEF
JUSTICE ROBERTS: Thank you, counsel.

Mr. Waxman.

ORAL
ARGUMENT OF SETH P. WAXMAN ON BEHALF OF THE RESPONDENTS

MR.
WAXMAN: Mr. Chief Justice, and may it please the Court:

Let
me start by answering a couple of, I guess, science or technology
questions that came up before launching into our doctrinal
position.

First of all, Justice Kennedy, soybeans are soybeans.
They are harvested at a particular point in time, whatever use is
going to be made for them. It is not a plant like a flower,
geranium for example, which has to be left to go to seed, or alfalfa.
The bean is

34

the seed.

All soybeans have to be processed to
be used in any way. If they are going to be planted, they have to
be cleaned before they are put in the ground at the right time. If
they are being fed to either humans or animals, they have to be
processed in a way that eliminates an enzyme that makes them
indigestible by animals.

Justice Scalia, your question about
well, farmers now just can't do second plantings because
soybeans are put in huge grain elevators and different
varieties are mingled, that is true in the sense that if one
or more of those soybeans were protected by a patent, the actual
growing of the use of those patented inventions without a license
would be infringement, although, of course, if no glyphosate were
put on top of it, neither the farmer nor Monsanto would ever know
that there was an act of infringement.

But more to the
point, farmers -- I mean, the planting of second crops, that is
crop rotation of interspersing soybeans and winter wheat, is very,
very common. There are hundreds of thousands of soybean farmers
who do this every year.

Mr. Bowman has acknowledged that so far as
he knows, he's the only one who's doing it this way.

35

But there are
plenty of other ways in which he could obtain a much less expensive
crop of -- you know, a particular variety of soybean, so one that
will all grow to the same height and germinate at the same time. And
in fact, he explained this to the district court in his
response to the motion for summary judgment at page 152a of
the joint appendix.

He said defendant wanted a cheap source of
seed for his second crop beans because of the normal risks in
growing "wheat beans;" that is, the second crop that follows the
harvesting of winter wheat.

Quote, "defendant simply wasn't going
to plant the high priced soybean seed after his wheat crop."
And here's the relevant sentence. "Defendant could have purchased
conventional seed, that is, non-patented seed, and then saved its
offspring for wheat beans."

In other words, he could have
gone and bought a non-patented -- a bag of non-patented seed for
much less money, and used it as his second crop, or
harvested a portion of it -- and soybeans replicate at a rate
between 20 and 80 times in each generation -- and have a perpetual
source for his second crop thereafter.

JUSTICE GINSBURG: But he
couldn't put the herbicide on -- he couldn't -- if he went and
bought

36

conventional seeds, not the genetically improved seed -

MR.
WAXMAN: Exactly.

JUSTICE GINSBURG: -- then -- then he wouldn't
-- what would the yield be if he put the herbicide on it and they
were all killed?

MR. WAXMAN: Justice Ginsburg, the -- the
glyphosate resistance doesn't change the yield of a particular
plant, it changes the way you have to control weeds. And he would not
be able to use Monsanto's technology that would allow aerial
application of an herbicide. He would have to -- if he wanted to buy
plain old, you know, conventional soybeans, he has to
control for weeds in the conventional way.

And here's the very next sentence in his response to the Court. "Defendant" -- that is,
instead of purchasing conventional
seeds and saving them, he says "Defendant decided to purchase a
grain dealer's commodity grain because he felt there was a good
chance he would obtain mostly grain that would be resistant to
glyphosate," and therefore, he could use Monsanto's
technology without having to pay for it.

Mr. Chief Justice,
your question about this is a new case and -- let me go first to
your first question in the case, which is why would a company ever
want to do this? I think the answer is that without the

37

ability -- let's talk
about soybeans and then broaden it to other kinds of readily
replicable technologies - without the ability to limit
reproduction of soybeans containing this patented trait, Monsanto
could not have commercialized its invention, and never would have
produced what is, by now, the most popular agricultural
technology in America, because as Ms. Sherry was pointing out,
the sale of the very first Roundup Ready soybean seed, from which
all the trillions of Roundup Ready soybean seeds in existence now
derive, would have under, Mr. Bowman's theory, fully exhausted not
only Monsanto's rights in that seed that was sold, but in all
progeny unto the -- however many generations Justice Breyer
thinks is "not too many."

I think it's important to understand how
this technology works. The Department of Agriculture licensed
Monsanto to engage in a transformation event; that is, to
introduce its recombinant gene into soybean germ plasma. It's illegal
to do it unless you get a government license to do it. And you can do
it once. And that is done by the technology company, use -
taking something what's called a gene gun and using the gene
gun to inject recombinant DNA into regular germ plasma.

JUSTICE SCALIA: What do you mean you can do

38

it once? I don't know what you --

MR. WAXMAN: The Department of Agriculture authorized Monsanto to engage in -- to
transform natural -- natural plant material with its recombinant gene in one
single event that is referred to as a transformation.

JUSTICE SCALIA: One shot of a gun.

MR. WAXMAN: I think you may be able to shoot several -- I don't know whether
you can shoot a
whole round or whatever. But in any event,
it's one event.

(Laughter.)

JUSTICE SCALIA: You can't rob a bank with it, though, right?

(Laughter.)

MR. WAXMAN: I, in my mind, have been
trying to figure out what a gene gun looks
like. And I don't know -- I don't know if you could use it to rob
a bank. But the point is -- and the -- the Federal Register site
for the transformation event with respect to Roundup Ready
is -- is provided in a footnote in our brief. What happens then is
that Monsanto uses those transformed cells to grow a soybean
plant.

And that soybean plant produces genetic - produces
seeds or soybeans that have the recombinant

39

Roundup Ready technology in
it. Monsanto then provides -- in almost all of the cases, Monsanto
engages in licensed sales of those transformed seeds to hundreds of
different seed companies that produce different varieties, and
they make both conventional seed with a particular varietal makeup
and a Roundup Ready version of that variety.

Monsanto provides
the soybeans that it has transformed to the seed companies, to the
hundreds of seed companies for consideration. Under Mr. Bowman's
theory, that was it for all of Monsanto's rights with respect
to this technology. The very first time it took an original
transformed seed and sold it to a seed company so that it could
bulk up and cross-breed and produce different varieties, Monsanto
had lost all of its patent rights.

In other words, by go at
-- having committed hundreds of millions of dollars in 13 years to
develop this technology in the very first sale of an article
that practices the patent, it would have exhausted its
rights in perpetuity.

Now, we -

JUSTICE KAGAN: Mr.
Waxman, there is a worrisome thing on the other side, though, too.
And that is the Bureau position has the -- has the capacity

40

to make infringers out of everybody. And that is
highlighted actually in this case by how successful this product is and
how large a percentage of the market it has had.

So that -- you know,
seeds can be blown onto a farmer's farm by wind, and all of a sudden you
have Roundup seeds there and the farmer is infringing, or there's a
10-year-old who wants to do a science project of creating a soybean
plant, and he goes to the supermarket and gets an edamame, and it turns
out that it's Roundup seeds.

(Laughter.)

JUSTICE KAGAN: And, you know,
these Roundup seeds are everywhere, it seems to me. There's, what, 90
percent of all the seeds that are around? So it seems as though -- like
pretty much everybody is an infringer at this point, aren't they?

MR.
WAXMAN: Certainly not. Let me make - let me make three points, starting
with the edamame and moving up to inadvertent infringers.

Edamame is an
immature form of the soybean seed. You can plant edamame -

JUSTICE
KAGAN: Okay. I'll change my hypothetical.

(Laughter.)

41

MR. WAXMAN: If I take my -- you know, my Girl
Scout troop and have them do a science experiment, it will rot but it
will not generate. And that -

JUSTICE KAGAN: And I thought I was
being so clever, too.

(Laughter.)

MR. WAXMAN: Well, it
also reminds me that my original answer to Justice Kennedy is
wrong, which is that edamame is taken from the pods before the --
the thing becomes actually a seed that can be processed in
any other way.

Your point about the ubiquity of Roundup
Ready's use is a fair one. I mean, this is probably the most
rapidly adopted technological advance in history.
The very first
Roundup Ready soybean seed was only made in 1996. And it now is grown
by more than 90 percent of the 275,000 soybean farms in the United
States.

But size -- that is, success -- has never been
thought and can't be thought to affect the contour of patent rights.
You may very -- with soybeans, the problem of blowing seed is not
an issue for soybeans. Soybeans don't -- I mean, it would take
Hurricane Sandy to blow a soybean into some other farmer's field. And
soybeans, in any event, are -- you know, have perfect
flowers; that is, they contain both the pollen and the

42

stamen, so
that they -- which is the reason that they breed free and true,
unlike, for example, corn.

The point that there may be many farmers
with respect to other crops like alfalfa that may have some
inadvertent Roundup Ready alfalfa in their fields may be true,
although it's -- it is not well documented. There would be
inadvertent infringement if the farmer was cultivating a patented
crop, but there would be no enforcement of that.

The farmer
wouldn't know, Monsanto wouldn't know, and in any event, the
damages would be zero because you would ask what the reasonable
royalty would be, and if the farmer doesn't want Roundup Ready
technology and isn't using Roundup Ready technology to save
costs and increase productivity, the -- the royalty value would be
zero.

JUSTICE BREYER: Well, is -- I mean, that is an
interesting question, because you can imagine -- you see, this is
-- your answer -- this really deals with all -- it could be with
genetic patents, with -- with hosts of things which are
self-replicating.

MR. WAXMAN: Mm-hmm.

JUSTICE BREYER: And
some of the self-replicating items, which are infringing items,
end up inadvertently all over the place. Is there anything

43

in the patent law that deals with that? Is an
involuntary infringer treated the same under patent law as a voluntary
infringer?

MR. WAXMAN: Well -

JUSTICE BREYER: Is -- is there
precautions that you take? I mean, is there anything in patent law that
helps?

MR. WAXMAN: So infringement is -- unlike contributory
infringement or induced infringement, the act of infringement, that is a
violation of Section 271 -

JUSTICE BREYER: Right.

MR. WAXMAN: -- is a
strict liability tort, but it requires affirmative volitional contact -
conduct. That is, it's not that -- a thing doesn't infringe; a person
infringes.

JUSTICE BREYER: Well, the person plants it.

MR. WAXMAN: The
person -

JUSTICE BREYER: I mean, he plants it, but he doesn't even
know, you know. He's just got -- we can imagine a lot of circumstances
where this would be a - where Justice Kagan's question could apply.

MR.
WAXMAN: I mean, take the -

JUSTICE BREYER: But you're just saying that
would need a -

44

MR. WAXMAN: Sure.

JUSTICE BREYER: -- modification in patent law.

MR.
WAXMAN: Of course. I mean, take the example, and this goes to I
think the comment made by the Chief Justice, that even in the
software context, we haven't had this case yet. You did have this case
in - in Microsoft v. AT&T that involved, you know,
Microsoft's golden disk that has the Windows Operating System
on it, which is patented, and was being exported overseas for
introduction into, you know, computers that were manufactured
overseas. And AT&T's patent, which was a method of compressing
speech, was practiced by the Windows software.

And this
Court held that, although the writing of the Windows Operating
System into computers in the United States would have infringed
the patent, and when Microsoft did that it did infringe AT&T's
patent, the fact that the copies were made onto the hard
drives of the computer overseas meant that the act of
infringement occurred overseas and there was not an export
of -- of an infringing product for the purposes of infringing
overseas for purposes of Section 271(f).

So I think you have
decided in the context of software, which of course replicates
even more

45

readily than soybeans do or vaccines or cell lines or
plasmids, that the copies that are actually made when a -- a
software is written onto the hard drive of a computer is a
different thing than the disk that was sent and is infringing if it
occurs within the United States.

JUSTICE BREYER: What about --
what about the other question -

MR. WAXMAN: So the other one
-

JUSTICE BREYER: No, no, no, I want to go back to a
different question that was asked, which was the question what do
you think we should do about this other aspect of the case, the
licensing aspect? I mean, I would have thought it doesn't concern
Monsanto's license of generation 1, because insofar as it's
relevant here generation 1 carries the license that is just
permissive.

It is to create generation 2. But -- but they
also said something in the circuit about a license -- about a
restriction, implied perhaps, on - on the use of generation 2 by
the grain elevator for creating generation 3, namely you can't do
that.

Now, they -- they thought, the circuit, that there's
some restriction in a license and they have a doctrine that seems
to say that you can restrict

46

licenses -- through licenses the use of a
product after it's been sold. And that would seem contrary to the
first sale doctrine.

MR. WAXMAN: Okay. Let me -- let me answer
your question this way: First of all, we don't think that there's
any need whatsoever for this Court -- we agree with the Government
that there's no need for the Court to address the question of
conditional sales and the extent to which patent law recognizes
under some circumstances conditional sales, because in this case
the Federal Circuit did not address that ground which we
advocated and we still advocate, but instead said -- and I'm
reading from 14a of the petition appendix.

"Even if Monsanto's
patent rights in commodity seeds are exhausted, such a conclusion
would be of no consequence, because once a grower like Bowman plants the
commodity seeds containing Monsanto's Ready technology and the
next generation of seed develops, the grower has created a newly
infringing article."

In other
words, what the Federal Circuit decided, and it is entirely
correct and it should be affirmed on that basis, is what you're
calling I think generation 3, let's say that for simplicity's
sake, since generation 1 is the original soybean sold by

47

Monsanto to seed companies, let's just say that the bags of
soybean seeds that farmers go to purchase from seed dealers is
called generation N and they are licensed to produce generation N plus
1. But then, what about N 5 plus 2?

So what the Federal Circuit
held is N plus 2 has never been sold. It was created, it exists
without a sale, and because a sale is the sine qua non of patent
exhaustion, which is also referred to as first sale, there is
no exhaustion.

Alternatively, the Federal Circuit said in
any event, even when exhaustion applies, it only privileges
the using or selling of the article sold; as Your Honor's
questions pointed out originally, it never privileges the making
of a new infringing product.

JUSTICE KENNEDY: Could -- could you
prevail in this case if we focused just on use rather than make?

MR. WAXMAN: If you're referring to generation N plus 2, the
answer is yes, because those are newly infringing products with no
exhaustion of Monsanto's rights, and as a consequence farmers have
no authority to use, make, sell, or offer to sell without
Monsanto's authorization. That is a -- just a straightforward
application of section 271.

JUSTICE SOTOMAYOR: Mr. Waxman, I want
to go

48

back to Justice Breyer's question and
reformulate it as a different question, with I think the same answer -

MR. WAXMAN: Okay.

JUSTICE SOTOMAYOR: -- but I just want to make sure you
and the Government are exactly on the same page.

Both of you are
suggesting, I think -- that was Ms. Sherry's last response -- that we
were explicit enough in Quanta and we don't have to address whatever
lingering confusion the Federal Circuit may have with respect to
conditional sales at all in this case?

MR. WAXMAN: I -

JUSTICE
SOTOMAYOR: You're -- you're telling us we don't need to reach that prong
and we shouldn't.

MR. WAXMAN: I'm -- I agree that you don't need to
reach the prong and you shouldn't.

JUSTICE SOTOMAYOR: I understand we
don't need to, but the question is should we? Is there a need -

MR. WAXMAN: I think that -- I think
that an appropriate case will come up where it will be important for you
to determine that. And our third argument,

49

which wasn't addressed by the Federal Circuit and isn't
necessary to affirm, is that conditional sales are not ipso
facto unenforceable; that is, a -- in an instant - everybody
understands that if instead of selling technology, you lease it,
and you sign a license that imposes conditions on that lease, you
know, unless they are unreasonable, conditions that are reasonably
related to exploitation of the invention are enforceable. Mr. Bowman
acknowledges that. Everyone acknowledges that.

Our single
submission here is that where you have a technology that cannot be
leased because it will consume itself in whatever use one makes of
it, and therefore has to be -- an article embodying the
invention has to be sold and where the invention cannot be
commercialized if it -- if the inventor has to realize its full
costs of development and a reasonable rate of return on the first
sale, the fact that there is this necessary sale in order to
commercialize the invention cannot ipso facto make all such
conditions unenforceable. And that's all -- if you were to reach
the conditional sale issue in this case, that is all we think
this case stands for. And the reason I think -

JUSTICE SOTOMAYOR:
Actually then you do have a different position than the Government
does.

MR. WAXMAN: Yes, and I think the reason, if

50

we take it out
of the soybean area, let's look at vaccines. Because the Roundup Ready
gene essentially immunizes soybean plants from the herbicide in the
same way that a life-saving vaccine will immunize individuals
that receive it from some external -- it wouldn't be a
herbicide -- a life threat.

Okay. Vaccines are live. They are
live cultures; they can regenerate themselves. If a company
develops the vaccine for, you know, H1 -- I shouldn't be
using -- an important life-saving vaccine -

(Laughter.)

MR. WAXMAN: -- it's unsupportable to say that you cannot
sell a quantity of that vaccine without exhausting all of your
rights in it.

I mean, when Schering-Plough or Bristol-Myers
develops a vaccine and sells some of it to CVS so I can go in and
get injected, they haven't lost all of their patent rights in that
vaccine. CVS can't turn around and become a competitor.

JUSTICE SOTOMAYOR: Simplifying this case, you can't take the
person who's been given the vaccine and take vials of their blood and
keep selling it? Is that your -

MR. WAXMAN: Yes, and keep
-- well, keep replicating it in competition. Take another example -

51

CHIEF JUSTICE ROBERTS: Well, is that how it works?

(Laughter.)

CHIEF JUSTICE ROBERTS: No, I'm serious. I
mean, your example, it seems to me, is not quite on point
because it's not a situation where the intended use of the vaccine
necessarily results in regeneration of it. In your hypothetical, CVS
was going to some lab and making more, right?

MR. WAXMAN:
Well, CVS was presumably buying it either from the manufacturer or
another lab. But the point here is, to take the software example,
if I go to, you know, Staples and buy the Windows operating system
on a disk, I don't have the authority to put it in a disk
replicator and press a button and make a million copies of it. And -

JUSTICE BREYER: But you don't need that because in each
instance, as you say, you are making new ones. It's the making of the
new ones, not the use of the old ones, where you prevent that from
being done.

JUSTICE BREYER:
Then you use the word "use" and you get to the same place.

MR. WAXMAN: I mean, my
submission about -

JUSTICE BREYER: I don't think you can think of an example. I
mean, you say -- I don't think you can think of an example where
if you win on the other ground, you can produce a bad result for
the manufacturer or the inventor because you haven't treated
the conditional sale like a license. I'm not saying you can't, I
just can't think of one.

MR. WAXMAN: Okay. Here's one. I will use
something that doesn't make itself, because we think that is
covered by the new article. Let's say that I invent a new, miraculous
new machine. I get a patent for it.

I want people to be able
-- I'm going to commercialize it or I'm going to license with
people to commercialize it, but I want people to be able to study
it and research it. And so, like Monsanto with its seeds, I
sign -- I provide a copy of the machine to MIT with a
research-only license; that is, you can use this

53

machine to figure out
how it works and develop new applications and all that sort of
stuff.

If that sale is exhausting for all purposes, I can't
prevent MIT or a third party that MIT provides the machine for --

JUSTICE BREYER: So lease it.

MR. WAXMAN: -- to go into competition with it.

JUSTICE BREYER: So lease it.

MR. WAXMAN: Yes, but you
can't lease articles like software and, you know, soybeans that
consume themselves in any use other than an art experiment.

JUSTICE KENNEDY: I do have this problem that goes back to
Justice Scalia's example. What about the commodity bin that has 2
percent of the patented seeds in them? Now, you get away from the
article by saying, oh, well, almost all seeds are Roundup these
days. But let's have some different commodity where there are
three or four different patented items but 1 percent or 2 percent of
the seeds are in the bin. You can't -- you can't sell those. That
seems to me a very extreme result.

MR. WAXMAN: Well, I mean,
when you say you can't sell them. So, as Ms. Sherry was pointing out
-

54

JUSTICE KENNEDY: You can't sell them if
they know they are going to be used for seeds, and you can't
use them for seeds even though there is only 1 percent of the
seeds?

MR. WAXMAN: That would be true even if this case came out
another way, Justice Kennedy. First of all because grain elevators
are prohibited by state and federal law from selling seed, period.
They sell - they buy grain and they sell grain. They can't sell
seed.

Number 2, almost all varieties of soybeans or
other crop plants are currently protected by the - under the
patent -- the Plant Variety Protection Act. As this Court and
Congress recognized, the requisites for getting a certificate are
-- I mean, it's like a registration requirement.

And we know
from J.E.M. and the relevant provision of the PVPA that it is
unlawful to divert crops that are protected by a PVPA certificate
for reproductive uses. So irrespective of all of this, whatever
happens, even if there is only 1 percent of patented soybeans in a
grain elevator, the grain elevator can't sell it as seed both
under the federal and state seed laws and under the Patent Variety Protection Act.

55

That's why the solution for farmers like
Monsanto -- like Mr. Bowman is to simply buy conventional seed, multiply
it, you know, 20, 30, 40, 50, 80 times in a single generation and save
1/80th of it to replant in his second crop, if he doesn't want to buy
Roundup Ready technology for his second crop and use the glyphosate
aerially.

Unless the Court has further questions, we will submit.

CHIEF JUSTICE ROBERTS: Thank you, Mr. Waxman.

Mr. Walters, you
have five minutes remaining.

REBUTTAL ARGUMENT
OF MARK P. WALTERS ON BEHALF OF THE PETITIONER

MR. WALTERS: I'd like to
first address the statement that this is not a traditional farming
practice. It may be occasional, when a farmer is in a real desperate
situation, or it may apply to Mr. Bowman's situation, where he wanted a
very cheap source of seed for his second crop.

But in the record at
153a, among other places, he discusses how he's gone to the grain
elevator over the years a number of times, and how other farmers have
gone to the grain elevator for generations. So a

56

ruling in favor of
Monsanto here would effectively eliminate that seed -

JUSTICE
SCALIA: Do you agree that it's unlawful for grain elevators to sell
it for replanting?

MR. WALTERS: No. I do not. And what he is
referring to is State labeling laws that prevent grain
elevators from actually scooping up grain, packaging it up and
saying this is seed, because they all look alike to -- to the eye. And
so grain elevators are certainly not allowed to dupe seed
purchasers, but those laws are there to protect the seed
purchasers.

Mr. Bowman bought grain without any restrictions on
how he could use it. That broke no laws, and it does not violate the
PVPA. I mean, Monsanto didn't assert a PVPA certificate. Surely it
has them. Did not assert them in this case and could not assert
them in this case because there's no single variety that Mr. Bowman
planted. So that's not a good argument.

CHIEF JUSTICE
ROBERTS: What -- what about Mr. Waxman's suggestion that we've
already decided this in Microsoft v. AT&T?

MR. WALTERS: That
case is not on point, Your Honor. That had to do with 271(f), and
actually came out on the side of more restrictive patent rights.

57

And this is not like software. This is an
invention that the only way to use the invention -- now, repeat, the
only way to use the invention -- is to plant it and to grow more seeds.

So if you don't apply the exhaustion doctrine and allow someone to use
it, you're choosing patent rights over personal property rights, and
that's never been done in 150 years of this Court's exhaustion cases.

JUSTICE BREYER: Don't people or animals eat them?

MR. WALTERS: That is
certainly a use, but it's not the invention.

JUSTICE BREYER: Well, then
why is it the only way you can do is to plant them? That isn't the only
thing you could do with it -

MR. WALTERS: Well, that's not use.

JUSTICE
BREYER: You can buy them from the grain elevator and sell them for other
things.

MR. WALTERS: That's not use of the invention, Justice Breyer.
And exhaustion is about conferring on the purchaser a right to use the
invention. There's no limit to Monsanto's -

JUSTICE BREYER: The
invented thing. The invented thing. The invented aspect of the seed is
it

58

has a gene in it that
repels some other insecticide or something that they have. I
understand that.

MR. WALTERS: The same argument came up in
Quanta, Your Honor, with -

JUSTICE BREYER: You don't use
that. I don't think they used that particular -- well, go ahead.
You go ahead.

MR. WALTERS: There were other uses for the
computer chips, of course, that were asserted. And the key was
that those computer chips practiced the patent. And you would
swallow up the Exhaustion Doctrine entirely if we just could think
of other uses for these things that have been sold.

The key
is, does it use -- is the purchaser allowed to use the invention? And
under Monsanto's theory, the purchaser isn't allowed to do that. And
that's no Exhaustion Doctrine at all -

JUSTICE BREYER: The
people buying from grain elevators are mostly people who take
these chips -- whatever they are, the seeds -- and they sell
them for making tofu, or they sell them to eat, or this --
there are loads of uses, aren't there?

MR. WALTERS: But the only
use of the invention is to plant it, and that's the use that
Mr. Bowman makes.

59

JUSTICE SCALIA: Yes, but -- but that's - nothing
prevents him from planting it. What he is prevented from doing is
using the -- the consequences of that planting, the second
generation seeds, for another planting. That's all he is prevented
from doing. He can plant and harvest and eat or sell. He just can't
plant, harvest, and then replant.

MR. WALTERS: So -- the
judgment in this case was based on acres planted, and so I'm not
sure how many -- we talked a bit about the N plus 2 generation,
and we don't know in the record what the N plus 2 generation
was, in terms of his sales or his yields. That wasn't before the
district court on summary judgment. So I'm not sure how you could
affirm based on the judgment below, which was a finding that
conditional sales prevented the application of the Exhaustion
Doctrine.

JUSTICE
SCALIA: You know, you're saying that you are preventing him from using it.
He's not prevented from using it. He's not prevented from using it. He
can use it for what it's meant for, for raising a crop. He just cannot
use the

60

product -- that new
crop -- for replanting. That's all. He has to sell that new crop
for feed or for some other purpose. But to say that -- that he's
prevented from using what he has bought is simply not true. He can use
it, plant it, and harvest the crop.

MR. WALTERS: But you're
saying that there's no exhaustion in the progeny where he owns that
seed outright.

With that, we'll submit, and we'll ask that
the Court of Appeals be reversed.

Thank you.

CHIEF
JUSTICE ROBERTS: Thank you, counsel.

The case is submitted.

(Whereupon, at 12:37 p.m., the case in the above-entitled
matter was submitted.)